Download III- WHO-WAEMU COLLABORATION ON TOBACCO TAXATION

HIGH LEVEL EVENT ON TOBACCO CONTROL AND
TAXATION
EXPERIENCE OF THE WEST AFRICAN ECONOMIC
AND MONETARY UNION (WAEMU) IN TOBACCO
TAX HARMONIZATION
BY
ASSANE DIOUF
Washington DC, April 18-19 2017
Members States of the WAEMU – 8 countries
OVERVIEW
I- Preliminary considerations
II- Tobacco taxation system within WAEMU
II.1. Legal framework for the taxation of tobacco
II.2. Advantages and disadvantages of the WAEMU
Directive on the taxation of tobacco
III- WHO-WAEMU Collaboration on taxation of
tobacco
III.1. Objectives of collaboration
III.2. Actions already taken
IV- Future considerations
I-PRELIMINARY CONSIDERATIONS
Smoking prevalence remains relatively low in WAEMU countries
and remains comparable with prevalence rates in countries with
medium or low income.
There are approximately 5.244 million adult smokers aged 15 and
over and 811,000 young smokers 12 to 14 years in this region.
Smoking is responsible for 24,000 deaths per year.
The mortality rate for the WAEMU region is far ahead of the
average of the African continent with very high rates in Côte
d'Ivoire, Niger and Burkina Faso.
I-PRELIMINARY CONSIDERATIONS
WAEMU is the sub-region in Africa where cigarettes are the most
affordable in price:
But in Africa on average, prices and taxes are low compared to
global averages:
• Average price is US$ 1.74, below the global average of US$ 2.41
per pack.
• The share of excise tax in the retail price varies between 2% and
12% for the eight Member States, well below the African
average of 39.88% and far below the 70% recommended by
WHO.
CIGARETTE PRICE AND EXCISE TAX SHARE IN
RETAIL PRICE IN AFRICAN COUNTRIES, 2014
I-PRELIMINARY CONSIDERATIONS
All WAEMU countries are Parties to the WHO FCTC.
Countries are not at the same level by providing in-house adoption
of a tobacco comply with the FCTC law.
Incomplete or very weak laws in force in the country.
Industry Presence: all multinationals: Imperial Tobacco, British
American Tobacco and Philip Morris
I-PRELIMINARY CONSIDERATIONS
Challenges to tobacco control in the WAEMU region
The interference of the tobacco industry
The Lack of awareness of decision-makers
The weakness of the tax system and tax administration in the
countries
II.1. LEGAL FRAMEWORK FOR THE TAXATION
OF TOBACCO
Tobacco taxation of is regulated by:
 Decision No. 01/98 / CM / UEMOA of 3 July 1998
adopting the harmonization program of internal
indirect taxation within the WAEMU
Directives No. 03/98 / CM / UEMOA of 22
December 1998 and 03/2009 / CM / UEMOA of 27
March 2009
I.1. LEGAL FRAMEWORK FOR THE TAXATION OF
TOBACCO
Decision n°01/98 of 03 July 1998
 definition of a common list of categories of products
subject to excise duties
 setting a range of rates to be applied by product
 convergence of the tax base products
 standardization of rates for products
I.1. LEGAL FRAMEWORK FOR THE TAXATION OF
TOBACCO
Directives 03/98 and 03/2009
 objective: to harmonize excise duties in the WAEMU
 requiring states to impose excise taxes on tobacco and
beverages
 the taxable amount (ad valorem) is identical per product,
whether local or imported
 requiring states to apply a tax rate per product
 on tobacco products, the excise should be between 15% and
45% of the producer value
II.2. ADVANTAGES AND DISADVANTAGES OF THE
WAEMU DIRECTIVE ON THE TAXATION OF
TOBACCO
Advantages:
Harmonization of the tax system in the Union objective of the
common market
A single tax structure for all countries (in this case, ad valorem
based on product value):
 simplicity in definition
 ease of liquidation
 budgetary cost related to the increase in sales prices (inflation)
II.2. ADVANTAGES AND DISADVANTAGES OF THE
WAEMU DIRECTIVE ON THE TAXATION OF
TOBACCO
Disadvantages:
With regards to the tax structure being ad valorem on the product
value (producer price):
There is complexity and lack of tax efficiency in different aspects:
The current tax structure had led to larger price differentials
between products
The undervaluation of goods by the importer/producer
The difficulties of determining the taxable base
II.2. ADVANTAGES AND DISADVANTAGES OF THE
WAEMU DIRECTIVE ON THE TAXATION OF
TOBACCO
Disadvantages:
Some countries imposing differential tax rates (tiers)
Imposing a cap for the tax rate by the WAEMU Directive
Inadequate means of control by national governments
Market control failure by the tax authorities (lack of real
knowledge and monitoring of what is happening in the market)
APPLIED TAX RATES (15%-45%)
Summary of rates applied on tobacco products (cigarettes) in the
WAEMU
Benin
Burkina
Faso
Cote
d’Ivoire
Guinea
Bissau
Mali
Niger
Senegal
Togo
45%
30%
35%
25%
25%
45%
45%
45%
25%
17%
20%
23%
10%
15%
 4 of the 8 countries have now reached the maximum rates and cannot improve
their taxes further.
 Their prices and taxes remain extremely low compared to other countries
because of the limitations of the Directive.
III- WHO-WAEMU COLLABORATION ON TOBACCO
TAXATION
III.1. Objectives
WAEMU countries capacity building program on tobacco
taxation
increase the efficiency and effectiveness of current tax systems
improve the technical capacity of tax and customs
administrations to ensure compliance with legal provisions
allow governments to achieve their health goals through
appropriate fiscal policies.
III- WHO-WAEMU COLLABORATION ON TOBACCO
TAXATION
III.2. Work done so far
 Joint WHO-WAEMU workshop on the taxation of tobacco,
from
1
to
3
October
2013
in
Togo,
 Establishment of Technical Working Group on tobacco
taxation the UEMOA,
 First meeting of the Technical Working Group, from 23 to 25
July 2014 in Burkina Faso,
 based on feedback and data reported by WAEMU member
states: development of a joint WHO- WAEMU report on
tobacco taxation in West- Africa.
III- WHO-WAEMU COLLABORATION ON TOBACCO
TAXATION
 This report is the result of analyzes carried out by the
Technical Working Group, with technical support from WHO
economists.
 It focuses on systems and tax administration methods and
prospects for fiscal policy.
 The report is intended to draw the attention of policy makers
the urgency of Member States a revision of Directive UEMOA
on tobacco taxation.
 It also draws a suggested roadmap for revision of the current
directive and the harmonized tobacco tax system in place
III- WHO-WAEMU COLLABORATION ON TOBACCO
TAXATION
Roadmap for an efficient and effective tobacco taxation policy
among Member States for the period 2015-2020.
The roadmap is developed around three aspects:
Public health: prevention of deaths and diseases related to
tobacco consumption through reducing smoking;
Income for Government: Collecting a steady stream of income;
Tax harmonization: The priority for WAEMU convergence of
fiscal policies in countries to reduce illegal trade.
III- WHO-WAEMU COLLABORATION ON TOBACCO
TAXATION
Major recommendations with legal implications
Planned revision of the WAEMU Directive aims to improve
the current tobacco tax system and remove its weak points:
Remove the maximum tax rate (ceiling)
Introduce a uniform specific excise duty and move slowly
away from the ad valorem tax
Establish a minimum specific excise duty that Member
States apply 2020
IV- FUTURE CONSIDERATIONS
Once the Directive is revised and approved:
Ensure uniform application of the Directive by all states: avoid
economic distortions
Continued collaboration with WHO: capitalization of the work
of technical working group
Harmonization of WAEMUand ECOWAS* on tobacco
taxation guidelines
* The Economic Community of West African States (ECOWAS) is a regional group of
15 countries also trying to harmonize tobacco taxation. The 8 WAEMU countries are
all within the ECOWAS.
IV- FUTURE CONSIDERATIONS
Main recommendations from the operational standpoint
Establishment of effective systems for collecting and analyzing
data to better control and understand the tobacco market,
Promote the exchange of information between tax and customs
administrations,
Setting up a product traceability system through the
introduction of tax stamps or electronic tracking of goods in
transit in order to reduce the risk of illicit trade.
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ATTENTION
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